Weekly Economic Review | August 12, 2024

Economic Review

The Labor Department reported that initial jobless claims fell last week, potentially alleviating some concerns that the labor market is cooling too fast. Initial claims are always more volatile amid summer shutdowns of auto plants for retooling, and this year disruptions from Hurricane Beryl added to the volatility. First time claims in regular state programs recorded 233,000 for the week ending August 3^rd after the prior week’s report of 250,000. The four-week moving average climbed to 240,750 from 238,250 the prior week. Continuing claims, which include people who have received unemployment benefits for a week or more, rose 6,000 to 1,875,000 for the week ending July 27^th. The insured unemployment rate, the number of people currently receiving unemployment insurance as a percentage of the labor force, remained at 1.2%.

The Institute for Supply Management reported its Services index, which covers services and construction, rebounded in July after an exceptionally weak June release. A rebound in new orders and a sharp rebound in business activity into expansionary territory provided support for the index. The index recorded a 51.4 in July after a 48.8 reading in June. Business activity jumped almost 5 points in July to 54.5. New orders climbed to 52.4 from 47.3 the previous month, and the employment index rose to 51.1 from 46.1 in June. The prices paid component moved higher to 57.0 in July from 56.3. This gauge of service providers accounts for 90% of the economy. A reading above 50 indicates expansion in the services sector.

The Commerce Department reported the goods trade deficit narrowed in June as exports increased at a faster pace than imports. The deficit decreased 2.5% to $73.1 billion in June. Exports rose 1.5% in June to $265.9 billion from $262.0 billion in May and imports increased 0.6% to $339.0 billion from $337.0 billion the prior month.

The Federal Reserve reported consumer credit grew at a slower pace in June as consumers pulled back from using their credit cards. Credit outstanding rose $8.9 billion after climbing $13.9 billion in May. Credit card debt decreased $1.7 billion to $1.344 trillion after jumping $6.8 billion the previous month. Auto and student loan debt increased $10.6 billion in June after gaining $7.1 billion in May. Total non-revolving credit climbed to $3.735 trillion. These figures are not adjusted for inflation.

The Commerce Department reported wholesale inventories gained 0.2% in June to $903.0 billion. Year-on-year wholesale inventories have climbed 0.1%. Wholesale trade sales declined 0.6% in June after climbing 0.3% in May, with year-on-year sales up 2.4%. The ratio of inventory to sales climbed to 1.37 in June from 1.35 the prior month.

The Mortgage Bankers Association reported the MBA index of mortgage applications climbed 6.9% for the week ending August 2^nd after falling 3.9% the prior week. Refinancing activity jumped as mortgage rates tumbled after the release of a weak employment report the previous Friday. Refinancing applications rose 15.9% to 661.4 last week and home purchase mortgage applications increased 0.8% to 133.9. Refinancing made up 41.7% of applications with an average loan size of $312,400, while purchases average loan size at $426,900. The average contract rate on a 30-year fixed-rate mortgage plunged 28 basis points to 6.55% from 6.82% the prior week.

BOND MARKET REVIEW

Rates climbed last week in a volatile market after two weeks of declining rates as the market recalibrates its expectations of Fed rate cuts. Friday’s yields for the 2-, 5-, 10- & 30-year Treasury benchmarks securities closed at 4.05%, 3.80%, 3.94% and 4.22%. The 2yr/5yr, 5yr/10yr, 10yr/30yr and 2yr/30yr spreads closed at -25, 14, 28, and 17 basis points respectively.

Economic/Events Calendar